UncategorizedLegal drawbacks in the framework of Co-working Spaces

CO-WORKING IN INDIA

In the past decade, the concept of Co-working has gained popularity very prominently in India. Co- dependence on the professional front is the newest trend of the world economy. A major reason behind this is that the Generation-Y weighs the pros and cons of a business model from a very contemporary aspect, in comparison to the past generations. Gone are the times when big, private and independent office spaces were considered as an imperative asset for growth and to function appropriately.

Another reason why India has welcomed the concept of co-working with open arms is that our economy is the third largest contributor to the start-up ecosystem, globally and currently we have over 6000 start-ups functioning and growing in our country. Co-working spaces offer materialistic comforts as well as business and networking opportunities to the intellectual brains at very affordable and competitive prices. Moreover, these spaces come with zero responsibilities associated with the management and house-keeping of the office space.

In the modern world where time is considered as the most important asset, the level of comfort and convenience being offered by these co-working entities are very appealing and sustainable in the long run, even for short-term businesses. That being said, the co-working concept comes with its fair share of shortcomings that has fast gained visibility in the COVID19 times. Through this article we aim to highlight certain legal issues associated with the concept of co-working and will attempt to gain certain perspective on these issues.

MAJOR DRAWBACKS OF CO-WORKING

There are a few major setbacks associated with the concept of Co-working and a few of them have come to light in the COVID-19 era. Some of them have been discussed here as follows:

Dependency of the Lease/Rent Agreement on the Master Lease Agreement:

The terms and conditions associated with the usage of Co-working spaces are usually governed by Contracts entered into between the concerned parties. What is interesting to note is that the lease or rent agreements in co-working spaces are actually dependent on the fulfilment of obligations in the master lease or rent agreement that the co-working space owner has entered into with the owner of the property where such a co-working space is functional.  

Due to this dependency, if any of the obligations as per the Master Agreement are not complied with, then the direct consequences of the same are borne by the party who are party to the dependent, co-working agreement. Often times, this will lead to an abrupt termination of both the contracts and render the parties therein remediless.

Hence, it is imperative that certain safeguard against abrupt termination of these contracts are available in the form of mandatory Notice Period clauses. The Notice period clause ensures that a fixed and reasonable amount of notice period be given to the parties concerned in the event that the obligations of the parties in the master agreement are substantially changed and such change might directly affect the end-user of the co-working space.

This loophole can function as a major deterrent against usage of co-working spaces and must be considered by the owners of these co-working spaces to avoid legal consequences and loss of reputation in this volatile sector.

Cybersecurity issues

In this technologically advanced era, it is impossible to go about the day to day activities of any business or professional set-up without the use of the internet. As a matter of fact, one of the main unique selling proposition (USP) behind the popularity of the co-working concept is that they offer uninterrupted, high speed internet services to their customers.

This internet connection is almost like a public connection which is used on the same network by all the occupants of the co-working space. Hence, there is an increased possibility of data theft as well as loss of data privacy. For those occupants involved in the software or technology sectors, a leak of their confidential data or technological codes can be catastrophic to their businesses.

Additionally, major banking and monetary transactions are conducted online. If such critical information such as internet banking passwords or related information is compromised due to usage of this common internet network, the consequences can be drastic for all stakeholders. The occupant who has losses such critical information or suffers a security breach may suffer irreversible losses in their business or professional. Also, the owner of the co-working space also might face legal consequences as a result of such cybersecurity breach.

It is necessary that a safeguard mechanism is incorporated in the contracts governing usage and occupancy of such co-working spaces, whereby an explicit disclaimer be included by the parties pertaining to the risk associated with the usage of internet on the common network of the co-working space.

One way avoiding major legal consequences is that the contract must incorporate a severity clause which specifies:

‘… in the event that any data breach or cyber security violation arises due to the usage of the common network in the co-working space, the owner shall not be responsible for the consequences thereof and the user’s discretion is of the essence in such a situation.’

Conformity with Government norms of social distancing during and post COVID19:

“Social distancing is the new normal”

This phrase precisely elucidates how adversely the pandemic has changed the dynamics of not only our societal norms but our daily lifestyles. Gone are the days when crowded office spaces with close-spaced workstations could be utilised.

As per the World Health Organisation, the world has to strictly incorporate the social distancing norms in their lifestyle. It is a matter of fact that the after-effects of the pandemic are here to stay and we can never go back to life as it used to be in terms of social norms.

Necessary compliance with social distancing might also increase the costs associated with the maintenance of such co-working spaces.  The occupancy capacity of these spaces will now be slashed significantly and the costs associated with house-keeping and sanitation will sky-rocket.

Strict observation of social-distancing norms is no longer an option. It is actually mandatory to comply with these norms issued by the Government of India to curb the spread of the novel corona virus. The Ministry of Home Affair has made it abundantly clear that the Government of India has invoked the provisions of the Disaster Management Act to ensure compliance with social distancing norms.

In the event of any violation, penal provisions are applicable and can be strictly enforced against the accused persons that may be accompanied with heavy penalties against such organisations. Furthermore, violation of these norms may also result in shutdown of the organisation found in dereliction of the norms.

Hence it is imperative that the owners of co-working spaces strictly comply with all advisories and guidelines that have been issued by the various State Governments as well as the Central Government.

CONCLUSION

The nascent concept of co-working spaces in India is also facing a major financial set-back as are all the other sectors of the economy. The volatile nature of this sector makes it even more susceptible to adverse legal consequences if a diverse legal analysis of the key aspects of this sector is not conducted by the stakeholders.

The contemporary concept is prone to face a lot more challenges on the legal front. It is difficult to analyse and anticipate the possible issues owing to how novel this sector is. The legalities associated to this sector are also very unique and devoid of precedence. For instance, the contentions that may be considered for the invocation of a force majeure clause in a lease agreement for a co-working space may not be governed by the existing principles laid down by the courts at all. Therefore, it is very crucial for the stakeholders to analyse and anticipate the possible loopholes that cannot be identified at the face of it.

Co-working spaces are a concept of modern times. Damage-control and Pandemic Legal Intelligence is the need of the hour. It will be interesting to note how this sector faces the tide of the changing times and evolves into a booming sector of the Indian ecosystem.

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